In the Matter of Vikonics, Inc., et al.
An Administrative Law Judge has issued an Order Making Findings and Revoking Registrations by Default as to Six Respondents (Default Order) in Vikonics, Inc., Administrative Proceeding No. 3-13918. The Order Instituting Proceedings (OIP) alleged that seven Respondents failed repeatedly to file required annual and quarterly reports while their securities were registered with the Securities and Exchange Commission. The Default Order finds these allegations to be true as to six Respondents. It revokes the registrations of each class of registered securities of Vikonics, Inc., Vision Ten, Inc., Vizacom, Inc., VoiceFlash Networks, Inc. (d/b/a The DataFlash Corp.), Voyus, Ltd., and VSI Holdings, Inc., pursuant to Section 12(j) of the Securities Exchange Act of 1934.
The proceeding remains pending as to VoiceIQ, Inc. (n/k/a Yoho Resources, Inc.), the seventh Respondent named in the OIP. (Rel. 34-62662; File No. 3-13918)
SEC Obtains Fraud Judgment Against Jason M. Genet, Former Stock Promoter of China Energy Savings Technology, Inc.; Judge Orders $2 Million In Disgorgement and Penalties, Five Year Penny Stock Bar
The Securities and Exchange Commission announced that on Aug. 5, 2010, the Honorable Joanna Seybert of the United States District Court for the Eastern District of New York entered a Final Judgment against Jason Genet for his role in an elaborate stock manipulation scheme involving China Energy Savings Technology, Inc. The final judgment enjoins Genet from violating the antifraud and registration provisions of the federal securities laws, orders him to pay more than $2 million in disgorgement, prejudgment interest and penalties, and bars him from participating in a penny stock offering for a period of five years.
The Commission's complaint, filed in September 2009, alleges that Genet played a crucial role in the illegal "pump and dump" and market manipulation of China Energy's common stock. According to the Complaint, as part of the manipulation, Genet: (i) helped China Energy falsely obtain a listing on the Nasdaq NMS by helping China Energy to give away shares to hundreds of persons, and thereby creating the false and misleading impression that China Energy had a bona fide and active shareholder base; (ii) engaged in unregistered distributions of securities; and (iii) entered into secret arrangements to give away China Energy stock to persons who agreed to purchase China Energy stock in the open market, thereby creating the false and misleading impression that there was active trading and investor interest in China Energy. In payment for his fraudulent activities, Genet received thousands of shares of China Energy stock, which he later sold into the artificially inflated market, realizing illicit profits in excess of $1.7 million.
The Final Judgment, to which Genet consented without admitting or denying the allegations in the Complaint, permanently enjoins Genet from future violations of Sections 5 and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. It also orders Genet to pay $2,527,745 in disgorgement, prejudgment interest and penalties, and bars Genet from participation in any offering of a penny stock for five years from the date of the judgment. [SEC v. Jason M. Genet, Civil Action No. 09-CV-4215 (E.D.N.Y.) (Seybert, J)] (LR-21621)
SEC Sues Seattle-Area Retailer and Its Former CFO in Accounting Scheme to Fraudulently Boost Earnings
Commission Also Charges Company's Former Auditors with Professional Misconduct
The Securities and Exchange Commission today charged the former chief financial officer of a Seattle-area skin care retailer with fraudulently boosting earnings by reporting sales of anti-aging products promoted through Home Shopping Network infomercials while the products still sat unsold in the company’s warehouse. The agency also separately settled charges against the company and began administrative proceedings against the company’s outside auditors for professional misconduct.
The SEC alleges that Karl Redekopp, the former CFO of International Commercial Television Inc. (ICTV), turned millions of dollars of quarterly losses into profits by falsely accounting for ICTV's sales of the Derma Wand, a skin care appliance that purports to reduce wrinkles and improve skin appearance. Redekopp fraudulently recognized revenue before the Home Shopping Network had actually sold or delivered the product to viewers. He also improperly recognized revenue before a free trial period offered by the company had expired, and failed to reverse revenue from products that had been returned. Redekopp's misconduct caused the company to falsely report millions of dollars in excess revenue in 2007 and 2008.
"Redekopp violated fundamental principles of accounting to fraudulently boost ICTV's bottom line and conceal its true financial health from investors," said Marc J. Fagel, Director of the SEC's San Francisco Regional Office. "Unfortunately, ICTV's auditors turned a blind eye to the company's financial irregularities and failed to fulfill their role in investor protection."
The SEC's complaint against Redekopp, filed in federal district court in Tacoma, Wash., alleges that Redekopp recorded "sales" of products that had not been shipped or that the customer was not obligated to pay for. Redekopp's fraudulent accounting resulted in ICTV adjusting net sales by more than $3.7 million over a five-quarter period in 2007 and 2008, negating all originally reported net income for those periods to restated net losses. For example, for year-end 2007 alone, ICTV restated its originally reported net income of $1.5 million to a net loss of $1.1 million after correcting the fraudulent reporting.
The SEC's complaint charges Redekopp, who lives in Vancouver, B.C., with violations of the antifraud, reporting, books and records and internal control provisions of the federal securities laws. The SEC seeks a permanent injunction, a financial penalty, and an order barring him from serving as an officer of a public company.
In a separate complaint, the SEC charged ICTV for its misleading financial statements. Without admitting or denying the allegations, ICTV agreed to settle the charges by consenting to a final judgment permanently enjoining the company from future violations of the reporting, books and records, and internal control provisions of the federal securities laws.
The SEC instituted administrative proceedings against ICTV's former outside auditors Steven H. Dohan, Nancy L. Brown and their Miami-area firm Dohan + Company CPAs as well as Erez Bahar, a Canadian Chartered Accountant who lives in Vancouver.
According to the SEC's order, Dohan, Brown, and Bahar were responsible for the issuance of an unqualified audit report stating that ICTV's financial statements were fairly reported in conformity with Generally Accepted Accounting Principles (GAAP) and that the audit had been conducted in accordance with Public Company Accounting Oversight Board (PCAOB) auditing standards. The SEC's Division of Enforcement alleges that the former auditors failed to identify the material accounting deficiencies and violations of GAAP that formed the basis of the SEC's enforcement action against Redekopp. The Division of Enforcement alleges that Dohan, Brown, Bahar, and Dohan + Company CPAs engaged in improper professional conduct under Rule 102(e) of the Commission's Rules of Practice. An administrative hearing will be scheduled to determine whether remedial sanctions are appropriate.
The SEC's investigation was conducted by Jason Habermeyer, Adrienne Miller, and Tracy Davis of the SEC's San Francisco Regional Office. The SEC acknowledges the assistance of the British Columbia Securities Commission in this matter.
Proposed Amended 17d-2 Plan
The Financial Industry Regulatory Authority and Chicago Stock Exchange filed a proposed amendment to their plan for the allocation of regulatory responsibilities pursuant to Rule 17d-2 (File No. 4-274). Publication is expected in the Federal Register during the week of August 9. (Rel. 34-62657)
Proposed Rule Change
Chicago Board Options Exchange filed a proposed rule change (SR-CBOE-2009-075), as modified by Amendment Nos. 1 and 2, pursuant to Rule 19b-4 under the Securities Exchange Act of 1934 to establish a pilot program to list P.M.-settled end of week and end of month expirations for options on broad-based indexes. Publication is expected in the Federal Register during the week of July 26. (Rel. 34-62658)
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